Last summer’s record 16.6 million tonne Western Australian harvest delivered into the CBH Group’s storage network has netted the big co-operative its largest ever surplus and returned the biggest ever rebate to grower members.
In the 2016-17 year to September 2017, CBH generated a record surplus before rebates of $247m, up 120 per cent on 2015-16, its 2017 annual report showed this week.
This enabled it to return a total of $156.3m to growers through enhanced rebate offerings with more flexible options, an increase of 150pc on the previous year’s rebates.
Chief financial officer, Ed Kalajzic, said if a grower had delivered into the CBH network and had sold their grain to CBH’s marketing and trading division, they would receive a maximum rebate of $12.75 a tonne.
CBH’s operations division had contributed $6/t to the rebate, the marketing and trading division had contributed $6.25/t and 50 cents/t came from CBH’s processing investments, primarily its Interflour joint venture and Blue Lake Milling.
“The record 16.6mt harvest was a significant driver of our financial results as larger crops reduce costs on a per tonne basis, particularly for our storage and handling services,” Mr Kalajzic said.
“We also effectively managed costs during the harvest to make sure we operated efficiently and our disciplined approach to capital management meant we can rebate more of the group surplus to growers.”
Chairman, Wally Newman, said the record rebate would be “a significant benefit for growers (and) highlights the value which the co-operative structure provides”.
In the past four years WA growers have delivered above-average crops, with crop production growing faster than initially modelled in certain areas,
But Mr Newman and chief executive officer, Jimmy Wilson, said it was “unlikely” CBH would be able to match the record rebate level in the current season.
Mr Wilson also declined to be drawn on whether the outstanding financial results from a record harvest would reignite debate about whether it should change to a distributing co-operative.
After accounting for the rebate, net profit after tax (NPAT) was $91.3m, up 83pc on the previous year.
Revenue increased 6.3pc to $3.5b – $3.8b with pool revenue included – driven by more tonnes traded but partly offset by lower grain prices through 2016-17, Mr Wilson said.
“Our operations and marketing and trading divisions, as well as our investments, performed well in the face of an international grain environment that continues to provide challenges,” he said.
CBH’s operations division reported a surplus before rebates of $197.6m on revenue of $476m, up 12pc on the previous year, and it continued to invest in the network with $97.3m spent on capital projects and maintenance.
Completed projects included upgrades or new equipment at Beacon, Cunderdin, Dumbleyung, Merredin and Wagin receival sites plus more than 500,000t of emergency storage for the 16-17 harvest at the new Mirambeena site outside Albany.
Port facilities at its Geraldton berth were also upgraded.
Projects underway, but yet to be competed, included upgrades at Canna, Marchagee, Geraldton, Konnongorring, Koorda, York, Gairdner, Albany Port, Mirambeena and Cascade.
On the 16.6mt record harvest, Kwinana port zone received 7.4m tonnes, Geraldton port zone 3.4mt, Albany 3.1mt and Esperance 2.7mt.
Storage and handling within the operations division maintained market share at 94pc and bulk export market share was 98.4pc or 15mt.
Mr Wilson said CBH demonstrated the agility of its supply chain through the safe and efficient handling of the record harvest.
“In the past four years WA growers have delivered above-average crops, with crop production growing faster than initially modelled in certain areas,” he said.
“While managing such a large amount of grain can create challenges, CBH has responded by building additional storage and catering for unexpected events such as flooding and frost.
“Above all, the safety of our people is paramount, which is why we’re pleased with the substantial improvement in our safety performance with a 49pc reduction in our all injury frequency rate, well under target at 11 (employees) at the end of the year.”
Mr Wilson said growers were likely to see the speed at which CBH’s network strategy was implemented, accelerate this year on the back of the strong financial performance.
In 2016-17, 25 network strategy projects delivered an additional 300,000t of storage capacity.
The marketing and trading division reported a $58.3m surplus before rebates on revenue of $2.9b, up 4pc on the previous year.
It traded 9.4mt on international commodity markets in 2016-17, more than the previous year.
The annual report showed the division was Australia’s largest grain exporter with a 25pc share of national grain exports and it acquired more than 46pc of grain in WA and 13pc of South Australia’s harvest.
“Marketing and trading continue to maintain market share despite the intense competition from the Black Sea region that resulted in high global grain stocks and historically low prices,” Mr Wilson said.
While its grain processing unit recorded NPAT of $8.1m, up from $2m last year and with the SA-based Blue Lake Milling performing well through growing demand for oats and favourable seasonal conditions, CBH’s Interflour investment is now under pressure to produce growth.
During the year the US$70m Intermalt facility in Vietnam and the US$30m Mabuhay Interflour mill in the Philippines were completed.
“Both are now challenged to bring those new facilities on line and to aggressively pursue growth,” Mr Wilson said.
CBH’s fertiliser business continued to grow into its second year with 55,000t delivered compared to 50,000t the previous year.
But it is yet to turn a profit, recording a loss of $200,000 which was a significant improvement on the $1.2m loss incurred the previous year.
With increasing competition from the Black Sea area and Argentina in its contestable markets, primarily South East Asia, China and the Middle East, Mr Wilson said CBH would focus on three key areas going forward.
These were, he said, further reducing paddock-to-port costs to provide a competitive edge to growers in a global market, increasing market transparency and marketing and trading services and maximising returns from current processing investments.
“By targeting these key areas, we can extract the most value for growers, particularly from our storage and handling activities,” Mr Wilson said.